Profit is king, but there’s more to Grab’s big taxi acquisition

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Hello reader,

The king is dead, long live the king.

Where once strong revenue and a growing user base reigned supreme as the metrics by which to judge Southeast Asia’s startups by, profit has become the new North Star.

As VC funding dries up, investors have less time for eye-popping numbers that don’t equate to a solid bottom line. Instead, they are looking for strong fundamentals.

Companies in the region are adjusting accordingly, and sadly, layoffs seem to be their first port of call. GoTo (GOTO, IDX) has laid off almost 2,000 employees in less than a year, while Sea Group (SE, NYSE) achieved the holy grail of two profitable quarters shortly after retrenching 7,000 people in 2022.

Like GoTo, ride-hailing unicorn Grab (GRAB, Nasdaq) has never recorded a profit and also recently announced mass layoffs despite announcing no such move was coming. It’s hard not to see profitability as the main motivator for the decision, even though the company insisted that wasn’t the case.

Doubling down on money-making parts of a business is another way to angle for profit, and we may have seen an example of that last week.

In today’s Big Story, my colleague Simon analyzes Grab’s acquisition of Singaporean taxi firm Trans-cab. While Trans-cab’s status as a profit-generating business is likely part of the appeal for Grab, net income isn’t the only driver for this deal.

— Peter

THE BIG STORY

Image credit: Timmy Loen

Does combining Grab with asset-heavy Trans-cab make sense?
The move comes as archrival Gojek partners with the largest taxi company in Singapore.

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